The Credit and Financial Risk to a Car Purchase

Purchasing a new car has always been a game. Negotiating the price of the car and then negotiating the value of your trade in usually leaves consumers feeling like they probably could have “gotten a better deal.”

Now, because so many Chrysler and General Motors Corporation dealerships are closing, the game has taken on new risks.

First, your routine maintenance and warranty work may not be so routine. As dealerships close in small towns, consumers will be required to drive long distances to find authorized repair centers. Additionally, if part of your purchase negotiation included perks like free car washes or free lube and oil changes for a year or two, those will disappear with the dealership.

More serious is the fact that the records of your routine maintenance could be lost – and without those records your warranty will not be honored.

If your local dealership is about to close, go now and get a print-out of all maintenance done on your car. Then keep your own records of any future maintenance work.

But loss of warranty is only one of the risks. Something even worse is happening, and it can affect your good credit as well as your bank account.

You know that when you trade in a car that you haven’t paid off in full, that debt is a factor in deciding how much equity you have in the car – and thus how much credit you will receive toward the purchase price of your new car.

You know that the dealership “has” to pay off that old loan before they can re-sell the car.

But this isn’t always happening!

In the wake of poor sales and financial troubles for the dealerships, some of them simply didn’t do it. But they did re-sell the cars.

So now both you and the person who purchased your old car are facing trouble.

Until that old loan is paid off, you are still the one responsible for payment. So while you’re happily driving your new car and making payments on it, your credit report is showing month after month of unpaid debt on your old loan.

You know what that can do to your credit scores.

The person who purchased your old car has yet a different problem – since the car wasn’t paid off, he or she can’t get clear title.

If you’ve purchased a new car recently and traded in a vehicle that wasn’t paid for in full, check your credit report today. This could be a tough one to solve, but you do need to get started immediately.

And if you’re buying a used vehicle, demand proof of clear title before you part with your money.

Author: Mike Clover

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Disclaimer: This information has been compiled and provided by as an informational service to the public. While our goal is to provide information that will help consumers to manage their credit and debt, this information should not be considered legal advice. Such advice must be specific to the various circumstances of each person's situation, and the general information provided on these pages should not be used as a substitute for the advice of competent legal counsel.